On 27 May 2020, the FCA published Market Watch 63 setting out its expectations of market conduct in the context of increased capital raising events and alternative working arrangements due to the COVID-19 pandemic. Alongside the Market Watch, the FCA has also published Primary Market Bulletin 28 which provides an update for listed companies on an extension to the timetable for publication of half-yearly financial reporting.

The key messages in the Market Watch include:

  • The FCA recognises the uncertainty created by the COVID-19 pandemic and the operational challenges arising from the public policy on social distancing. However, it expects all market participants handling inside information to continue to act in a manner that supports the integrity and orderly functioning of financial markets. This includes complying with all their obligations under relevant regulation including the Market Abuse Regulation (MAR).
  • In response to the pandemic, the FCA anticipates many issuers will need to seek additional capital, leading to an increase in primary market activity. This, coupled with alternative working arrangements, will make it as important as ever that the right controls around market abuse, conduct and managing conflicts of interest are in place.
  • During this period, the FCA encourages a particular focus on: (i) ensuring inside information continues to be appropriately identified and handled by all persons involved in the information chain so that it is not misused for insider dealing or for commercial advantage; (ii) ensuring inside information is appropriately disclosed by issuers so that investors are not misled; (iii) maintaining robust market surveillance and suspicious transaction and order reporting by relevant market participants, in the context of changes in market conditions and the current use of alternative working arrangements; (iv) meeting the transparency and short position covering requirements under the Short Selling Regulation for market participants to support the effective functioning of the market; and (v) identifying and managing conflicts of interest by market participants that may arise around capital raising events.

In relation to MAR inside information obligations the FCA states, among other things, that market participants should assess the market abuse risks that may arise in their business including in the context of new working conditions. They should consider whether any systems and controls they have put in place continue to mitigate effectively the identified risks. Common industry controls such as a mandatory 2-week holiday for front office staff may be appropriate (and may also support the mitigation of other non-market abuse risks). Repeating or updating training to refresh staff on how they should be handling inside information may also be a sensible consideration for some market participants.

In Primary Market Bulletin 28 the FCA publishes a statement on temporary relief for the timing of the publication of half yearly financial reports. It also includes a statement on market practice on ‘going concern’ assessments. This follows difficulties raised by issuers about how to address COVIS-19 related uncertainties in the ‘going concern’ assessment and their disclosure in financial statements. The FCA also provides commentary on its view on issuers’ engagement with shareholders at this time, and issuers’ role in delivering ‘soft pre-emption’ in placings.